The EU and the US have moved closer towards mutual recognition of each other’s securities regulations following a meeting last week between Charlie McCreevy, the European Commissioner for the internal market and services, and Christopher Cox, chairman of the US Securities and Exchange Commission (SEC).

Mutual recognition would allow US brokers to access European stock exchanges without the need for these exchanges to register with the SEC. Exchanges have shunned registering with the SEC for fear of dual regulation by their home state and the US. US brokers can currently access European exchanges through affiliates in the relevant countries, but not directly.

McCreevy and Cox decided that as a first step, SEC and European Commission staff, assisted by the Committee of European Securities Regulators (CESR), would need to develop a framework for mutual recognition discussions. Cox and McCreevy determined that the mutual recognition process will also require consideration of a process for initiating discussions with the EU and interested member states, taking into account limitations on resources available for carrying out the relevant assessments.

As a result, Cox and McCreevy jointly mandated their staff to intensify work on a possible framework for EU-US mutual recognition for securities in 2008. They also agreed to work together closely during the year to review their overall progress. In addition, the SEC and European Commission officials and CESR staff plan to hold regular technical meetings over the year to develop a mutual recognition framework.

“The US and EU, which comprise 70% of the world’s capital markets, have a common interest in developing a cooperative approach to reducing regulatory friction and increasing investor access to investment diversification opportunities and enhancing investor protections,” the men said in a joint statement. “The concept of mutual recognition offers significant promise as a means of better protecting investors, fostering capital formation and maintaining fair, orderly, and efficient transatlantic securities markets. As we consider implementation of this concept, we encourage input from market participants.”